Real Estate

Strictly speaking, Missouri law does not require having a lawyer at your home closing, but it is highly recommended.

There are a number of reasons why the parties would want to have their own attorneys at closing. Among them are:

• To verify the deed information is correct so that title will pass properly;
  • NOTE TO READER: We recently attended a residential closing where one of the parties was listed incorrectly. We do not believe that title would have passed properly had we not identified the mistake.

• To explain and review the HUD-1 closing statement, and to work with the title company and lender if there are any mistakes or discrepancies on the statement;

• To review title closing documents that unnecessarily impose liability on the Buyers, and request the title company modify or remove them from the closing file.

• To review marked up title commitment, which determines the terms of the title insurance policy (for Buyers);

• To review lender documents for any red flag issues of concern (for Buyers);

• To resolve differences between the parties, or other oversights, which may require signing additional documents or amendments at closing.

• For more information on documents that are signed at closing, read this previous post.

The price for hiring an attorney just for closing is relatively inexpensive in the context of the home sale/purchase. As of 2015, our office attends closings in person for a flat fee of $499 anywhere in St. Louis County or St. Louis City, or by phone/video conferencing elsewhere in Missouri.

If you would like to hire us to attend your closing, or have questions about closing, please contact us at 314.862.2237 or at mjacob@marcjacobesq.com

Earnest money is a certain amount of funds given by the Buyers to either the Sellers or an Escrow Agent, who holds the funds in trust. If Buyers close on the property, these funds are applied to the purchase price at closing.

There are a number of reasons why Buyers submit earnest money along with, or very shortly after, signing the contract for the purchase of real estate. Among them are:

• In Missouri, a contract for the sale of real property, in addition to being signed by all of the parties and certain other requirements, must also be supported by “consideration.” Consideration must be something of value in order to bind the parties to the contract. Funds changing hands in the form of earnest money is the most common method of consideration used.

• If there is a breach of contract, the earnest money can become a matter of negotiation to allow the parties to part ways. For example, if Buyers improperly terminate the contract, many contracts allow Sellers to keep the earnest money as Sellers’ remedy for Buyers’ breach. Sometimes this is the exclusive remedy for Sellers, and sometimes this is in addition to the right to sue for damages or other rights. (For more information on Seller remedies, read this post).

• Earnest money shows Sellers that Buyers are serious about making this purchase and are willing to put cash up to demonstrate their seriousness. In a situation where there are multiple potential Buyers, each vying for the right to purchase the property, one criterion Sellers may consider in determining which contract to sign is the amount of earnest money submitted. That way if those Buyers breach, Sellers have an expectation that they are likely to at least get that amount of the earnest money deposit for their troubles and for taking the property off the market.

It is common in Missouri for the title company closing on behalf of Buyers to hold the earnest money deposit. For the title company to release the earnest money prior to closing or in a failed deal, both Buyers and Sellers generally need to agree in writing to this. Otherwise the title company may deposit the money with the local county court to protect itself from liability.

If you have questions about earnest money, or about purchasing or selling a home, please contact us at 314.862.2337 or at mjacob@marcjacobesq.com

Every county or municipality will have different rules for determining what is necessary to allow the new homeowner to get an occupancy permit. Some localities require no inspections whatsoever, while others require a host of government inspections.

Some of the government inspections that may be needed include:

• Electrical systems;
• HVAC systems;
• Plumbing systems or fixtures;
• Aesthetics of the home, such as external paint, shingle and driveway condition;
• Fire safety – in some localities this is a separate inspection that is conducted by the local fire district;
• General safety/code compliance, such as rails for stairwells.

The local government office that issues occupancy permits can provide information on what inspections are necessary, what they cost, and how to schedule them.

If you are working with a real estate agent, in our experience they can also be very helpful in either scheduling these government inspections or making sure the inspectors have access to the home.

Once the inspections have been completed, any issues that require repair or replacement should be discussed with your attorney immediately so that the Inspection Notice can be properly worded. (For more information on Inspection Notices, please read this previous post.)

It should be noted that even though the Buyer may need passing local inspection reports to get an occupancy permit, in many places, it is the responsibility of the Seller to order, pay for and facilitate these inspections.

If you have questions about government inspections, or buying a home, please contact us at 314.862.2337 or at mjacob@marcjacobesq.com

In a number of older contracts for home purchases we have seen, the Buyers’ obligation to close was conditioned upon their ability to get a loan. In the contract forms most commonly seen today, however, Buyers only have a certain number of days to secure financing (get a loan), after which they are obligated to close, even if the lender does not finance the purchase.

As you can imagine, this puts Buyers in a very difficult position. On one hand, Buyers may get something from their lender called an “Approval” or “Commitment.” That document, however, is not a firm commitment from their lender, and will likely be subject to a number of conditions that need to be satisfied prior to the lender funding the deal. In most cases, it is unlikely that Buyers will be able to satisfy all these conditions prior to the loan contingency deadline. For more information on the loan contingency deadline, read this previous post.

Obviously most Buyers do not have the ability to purchase a home without the help of a loan.

Here are a few of the possible outcomes Buyers could face if their lender does not ultimately provide financing:

• The Sellers could grant the Buyers additional time to secure financing.

• The Sellers could agree to finance all or part of the loan, if that would satisfy the institutional lender. (See this post for more information on Seller-Take Back Financing.)

• The Sellers could hold Buyers in breach and sue for damages.

• The Sellers could attempt to force the Buyer to purchase the home. Although we have seen Sellers and their legal counsel threaten this, most of the contract forms we see do not give them this right. Even if the contract contains such terms, we do not know if these terms would be enforceable in a Missouri court. (For more information, read this previous post on Seller’s remedies.)

• The Sellers could agree to keep the Buyers earnest money and let them out of the contract. In the event there is not much earnest money, the Sellers may require the Buyers to pay an additional amount.

If you have questions about your loan, or the loan contingency deadline in your contract, please contact us at 314.862.2237 or at mjacob@marcjacobesq.com

After the Buyers sign a contract to purchase a home, they will generally have a certain number of days for “due diligence.” This is the Buyers opportunity to determine if there are any problems with the home, title, etc. that would lead them to terminate the contract. (If done properly, Buyers will generally not lose their earnest money.)

The first type of inspection Buyers typically obtain is a Private Home Inspection. A Private Home Inspector looks through the entire home to find major and minor issues that the Buyers may want addressed prior to closing. For more information on how to find a Private Home Inspector, read this post.

Beyond the Private Home Inspection though, there are a number of other inspections that Buyers may want to consider and that may be suggested depending upon the situation. Among them are:

• Termite/wood-boring insect inspection;
• Radon inspection;
• Lead-based paint inspection;
• Roofing inspection;
• Plumbing inspection;
• Structural engineer inspection;
• Electrical inspection;
• Pool inspection;
• Chimney inspection;
• Back flow/ground sprinkler inspection/certification;
• Gas inspection;
• Other inspections may be available depending upon the location and specific need.

Some lenders may require a termite inspection. In Missouri, it is also common to get a radon inspection, especially if Buyers have young children, due to the sometimes high levels of radon located here.

Beyond these additional inspections, most of our clients wait until after they get their private inspection report back before determining what additional inspections are needed. That is why we advise our clients to have the Private Home Inspector visit the home as soon as possible after getting a signed contract, and to leave enough time for follow-up inspections in the event any are needed.

If you have questions about home inspections or buying a home, please contact us at 314.862.2237 or email us at mjacob@marcjacobesq.com

 

At a residential home closing, both Buyer and Seller can expect to sign a number of documents. Depending on whether the Buyer has obtained financing or not (through a bank or other conventional lender), the Buyer’s stack of documents may be much larger than the Seller’s stack.

The Buyer will be required to sign some documents related to their loan (Lender Documents), and some documents related to the actual property (Title Documents). Here are some of the documents the Buyer may sign or initial at closing:

• Lender Documents
  • Promissory Note
  • Deed of Trust (sometimes referred to as the mortgage)
  • Copy of previous tax returns
  • Copy of original loan application
  • Various lender disclosure documents
  • Acknowledgment that Buyer received the appraisal
  • Names affidavit
  • IRS Form to obtain future tax returns
  • An agreement to fix errors in the closing packet

• Title
  • HUD-1 Closing/Settlement Statement
  • Various Title Company disclosures
  • Copy of marked-up title insurance commitment, upon which the title insurance policy will be based
  • Notice of real estate tax assessment changes
  • Some Title Companies ask the Buyer to sign a document indemnifying them from damages for Title Company negligence.
  • In certain municipalities (for example St. Louis City), Buyer must also sign the deed conveying the property.

The Seller generally only needs to sign Title Documents, such as:

• Deed of conveyance
• Various title disclosures
• HUD-1 settlement/disbursement statement

The Consumer Protection Financial Bureau published a short pamphlet explaining some of the closing documents. It can be accessed here.

If you have questions about your documents, or would like an attorney to review your closing documents, please contact us at (314) 862-2237 or at mjacob@marcjacobesq.com

In some Missouri home sale transactions, the Buyer is unable obtain a loan from a bank or other conventional lender. In those cases, it may make sense for the Seller to finance all or part of the purchase if the Seller owns the property free and clear of all liens/loans. This is often referred to Seller take-back financing.

When the deal is structured this way, a number of documents are needed. Among them are 1) Promissory Note, and 2) Deed of Trust 

The Promissory Note is the document that shows a debt exists between the Buyer and the Seller for a certain amount of money and on certain terms.

The Deed of Trust, referred to as a “security instrument,” is the document that secures the property for the benefit of the Trustee (an agent of the lender).   Deeds of Trust are recorded with the appropriate county Recorder of Deeds and create a lien against the property, and are used to foreclose on the property if the borrower fails to pay.

Since every deal is slightly different, some deals may also require additional documentation, such as an asset purchase agreement (if Buyer is keeping any personal property of Seller), or a security agreement (if there is certain equipment or home-based business items that are part of the sale).

Note that if there is a primary lender (a bank or other conventional lender), and the Seller is only financing part of the deal, the Buyer must also obtain the primary lender’s consent to the Seller’s loan.

If you have questions regarding your situation, or need to document Seller financing, please contact us at (314) 862.2237 or at mjacob@marcjacobesq.com

There are many ways Buyers can find a private residential home inspector for a home purchase. You can find one through word of mouth, a web search in your locality, or a referral from your real estate agent or attorney. Websites that review local service providers may also review local home inspectors. Or you can also contact organizations that certify home inspectors, such as American Society for Home Inspectors (ASHI), or pick an inspector from their website.

Generally, a private home inspector can suggest other inspectors the Buyer may need, such as for termite, roofing, plumbing, radon, lead-based paint, etc. Alternatively, the Buyer can seek out these other inspectors as needed, through other sources. 

We feel it is very important for Buyers to hire their own private home inspector. A private home inspector should provide a detailed inspection report, along with digital images. This helps provide the Buyer clarity and an understanding of the inspection issues, which are important to have when it comes time to negotiate over them.

We recommend that our clients obtain a private home inspection as soon as possible after entering into a sale contract (or even before if possible). Once inspections are completed, and within the time frame provided for in the contract, the Buyer will generally submit an Inspection Notice or similar document requesting repairs or other concessions. Buyer’s attorney can more clearly inform the Seller as to repairs or other concessions the Buyer wants, when accompanied by a clear inspection report that contains digital images

If you have questions about hiring a home inspector, or would like to discuss inspection issues, please feel free to call us at 314.862.2237 or contact us at mjacob@marcjacobesq.com

We advise all of our clients to get a gas company inspection directly from the gas company that provides gas service to the home. We feel this is important for a number of reasons:

• If the home does not pass inspection, the gas company could shut off service;
• Some localities may not allow you to obtain an occupancy permit without passing a gas inspection;
• Gas issues are almost always safety issues, and should be addressed before the closing date;
• Litigation over gas issues can be extremely time consuming and expensive.

One of the most common standard sale contracts we see in St. Louis County, Missouri, used to include a paragraph obligating the Seller to obtain a passing Laclede Gas Company inspection no later than closing. This obligation has recently been removed from the standard contract. So when working with home purchasers, we always add this language back into the contract, obligating the Seller to obtain a passing gas inspection.

Be aware, however, that because it is no longer a standard part of the contract, lenders have become accustomed to allowing Buyers to purchase homes without passing a gas inspection.

This leaves Buyers in an unfortunate position of either:

• Obtaining the inspection themselves, but not necessarily having any ability to negotiate over that inspection with the Seller;
• Forgoing the gas inspection, even though it may be a safety issue or lead to future litigation; or
• Getting the inspection, but risking the home does not pass. In this situation the lender may refuse to close until the inspection is passed, even if the cause of the failure was not a safety issue. This will result in a potential delay to closing.

Despite these risks, due to the dangers to Buyer stated above, we continue to advise our clients to make it the Seller’s obligation to obtain a passing gas inspection, prior to closing.

If you are dealing with a similar situation, please contact us at 314.862.2237 or email us at mjacob@marcjacobesq.com

Whether one party to a contract has the right to force to the other party is referred to as Specific Performance.

Generally in a home sale contract, the Buyer does have the right of Specific Performance, meaning they can force the Seller to sell them the home. This is because the law sees land, or the real property, as unique. Therefore, there is no adequate substitute for it.   A Seller must specifically perform the contract and sell the property to the Buyer if the contract so indicates.

What happens if the Buyer refuses to buy? Can the Seller force them to buy the property? Here, the damages are really monetary in nature. The Seller was expecting to get paid a certain mount of money, and now the Buyer is backing out. In this situation, the contract may give the Seller the right to keep the earnest money. Earnest money is the amount of money the Buyer puts down in the event they breach the contract. Alternatively if the contract allows for it, the Seller can sue the Buyer for other monetary damages.

We have not seen residential real estate contracts that give the right of Specific Performance to the Seller, allowing them to force the Buyer to buy the property. That is not to say such contracts do not exist. If they do, however, we do now know if such a right is enforceable.

When a Buyer considers walking away from a deal, the Seller faces a financial loss. In these circumstances, the Seller, their agent, and likely their attorney will exert significant pressure on the Buyer, and may even threaten litigation, in order to compel the Buyer to go forward with the deal.

Buyers in these situations should recognize there is a danger that if they breach the contract, they may be responsible for the Seller’s legal fees if litigation ensues and the Buyer loses.

If you are considering breaching a real estate contract, or believe the other side has breached, we strongly advise seeking legal advice prior to doing so. We assist numerous clients in similar situations. Please contact us at 314.862.227 or email: mjacob@marcjacobesq.com